Ultimately I'm not convinced based on my own personal experience that many of the people asking the question truly understand either. I see it in a somewhat negative light because I feel it is essentially a cargo culted interview technique - recite a few 0()s, yeah we all did CS degrees, great (or not). If you actually try to get into the weeds...
I also don't think understanding big O notation is a great predictor of success of a software engineer. As well to ask if the series 1/n converges versus 1/n^2. What I'd rather see is that they can actually implement a solution. Take an ORM for example - a junior candidate knows how to use it and maybe how to debug it. A senior candidate might know that ORMs often emit very poorly optimised SQL and have some ideas on how to fix it. Example picked arbitrarily, ORMs aren't even my area.
Even in my actual area of specialty the number of industry programmers who understand say what an elliptic curve with complex multiplication actually is, or even undergrad group theory, is quite limited. And they don't need to - I mean it is ideal if they do, but you can still implement ecc without much theoretical knowledge. There's also a bunch of "not academic" knowledge on various implementation techniques that academics might not know or care about.
Brings me back to my ORM point. I'd much rather the person understands how the tools might fit together and more importantly learns any gaps or asks questions and identifies performance issues in the whole.
That's not to say that time and space bounds don't matter. They do. But 99% of my use of this knowledge has been to answer interview questions.